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2021 (6) TMI 155 - Commissioner - GSTCancellation of registration of petitioner - Non-filing of GST returns - scope of SCN - 3 months were wrongly omitted from SCN - Principles of natural justice - HELD THAT - The adjudicating authority has issued a show cause notice Reference Number WM060109193A0713 dated 19-11-2019 in Form GSTR-3A under Section 46 of the CGST Act 2017 stating the reason being Non-filing of GST returns (GSTR-3B) for the period October 2018 to March 2019 and April 2019 to September 2019 (Financial Year 2018-19 and 2019-2020). Further the adjudicating authority has passed the best judgment Assessment Order C. No. CGST-20/R-XXVI/Non-filing NBD/178/19/8287 dated 30-1-2020 in Form GST ASMT-13 under Section 62 of the CGST Act 2017 for non-filing of GSTR-1 statement and GSTR-3B return for the months of January 2019 to December 2019 and also for not discharging/set-off their outward liability (CGST Rs. 31, 13, 628/- SGST Rs. 31, 13, 628/- Interest Rs. 5, 46, 890/- and Penalty Rs. 6, 22, 726/-) total amounting to Rs. 73, 96, 872/-. The appellant has mainly contested in their appeal memo that the adjudicating authority has passed the best judgment Assessment Order C. No. CGST-20/R-XXVI/Non-filing NBD/178/19/8287 dated 30-1-2020 in Form GST ASMT-13 under Section 52 of the CGST Act 2017 for non-filing of GSTR-1 statement and GSTR-3B return for the months of January 2019 to December 2019 whereas in the show cause notice Reference Number WM060109193A0713 dated 19-11-2019 issued in Form GSTR-3A under Section 46 of the CGST Act 2017 for Non-filing of GST returns (GSTR-3B) under which the period of dispute has been shown from October 2018 to September 2019 Financial Year 2018-19 and 2019-2020. Thus the adjudicating authority did not issue any show cause notice in Form GSTR-3A under Section 46 of the CGST Act 2017 for the period of October 2019 November 2019 and December 2019 and passed the best Assessment Order dated 30-1-2020 taking the period from January 2019 to December 2019 without the following of principle of natural justice. Scope of SCN - HELD THAT - The adjudicating authority while passing Assessment Order in Form ASMT-13 dated 30-1-2020 under Section 62 of the CGST Act 2017 the period of dispute has been taken from January 2019 to December 2019 whereas in show cause notice issued under Section 46 of the CGST Act 2017 the period of dispute has been taken from October 2018 to March 2019 and April 2019 to September 2019. Thus as per above situation it is clearly proves that in the show cause notice the period of three months i.e. October 2019 November 2019 and December 2019 has been left unnoticed by the adjudicating authority and reply to show cause notice of the appellant dated 25-11-2019 has also not been considered. The registration of the appellant was cancelled with effect from 21-1-2020 vide Reference Number ZA080120044221D dated 21-1-2020 with following due procedure as per law. In these circumstances the provisions of Section 63 of CGST Act 2017 shall be applicable as the best judgment assessment order has been passed by the adjudicating authority on 30-1-2020 after cancellation of registration of the appellant on 21-1-2020 - matter remanded to the adjudicating authority with direction to follow the procedures as laid down under the CGST Act and Rules 2017 and other instruction/circular issued in this regard and pass the speaking order accordingly by following the principle of natural justice. Appeal allowed by way of remand.
Issues Involved:
1. Non-filing of GST returns and issuance of best judgment assessment order. 2. Issuance of mandatory notice under Section 46 of the CGST Act. 3. Consideration of input tax credit in best judgment assessment. 4. Calculation of interest on net GST liability. 5. Methodology for best judgment assessment in the real estate sector. 6. Violation of principles of natural justice. 7. Imposition of penalty under Section 73(9) of the CGST Act. Issue-wise Detailed Analysis: 1. Non-filing of GST returns and issuance of best judgment assessment order: The appellant, engaged in building and construction, failed to file GST returns (GSTR-3B) for the periods October 2018 to March 2019 and April 2019 to September 2019. Consequently, the adjudicating authority issued a show cause notice and passed a best judgment assessment order under Section 62 of the CGST Act for non-filing of GSTR-1 and GSTR-3B for January 2019 to December 2019, assessing a liability of Rs. 73,96,872/-. 2. Issuance of mandatory notice under Section 46 of the CGST Act: The appellant argued that the best judgment assessment for October 2019 to December 2019 was passed without issuing a mandatory notice under Section 46, violating Section 62. The show cause notice dated 19-11-2019 only covered October 2018 to September 2019, and no subsequent notice was issued for the period after September 2019. The adjudicating authority’s failure to issue a notice for October 2019 to December 2019 was deemed a violation of Section 62 and principles of natural justice. 3. Consideration of input tax credit in best judgment assessment: The appellant contended that the assessment order did not consider the input tax credit (ITC) available to them. The adjudicating authority based the assessment on GSTR-3B for July 2018 to December 2018 but failed to account for ITC claimed during that period. The appellant emphasized that the Department should have considered ITC while calculating GST liability, as per Section 16 of the CGST Act, and Circular No. 129/48/2019-GST, which mandates considering details of supplies in Form GSTR-2A for best judgment assessment. 4. Calculation of interest on net GST liability: The appellant argued that interest should be calculated only on the net GST liability payable in cash, not on the entire gross liability. They cited the GST Council’s recommendation and the proviso to Section 50(1) of the CGST Act, which states that interest should apply on net cash tax liability retrospectively from 1 July 2017. The appellant also noted that the proper officer is not empowered to assess interest under Section 62 without following principles of natural justice under Section 73. 5. Methodology for best judgment assessment in the real estate sector: The appellant contended that the Department’s methodology of averaging taxable value for six months (July 2018 to December 2018) to assess liability for twelve months (January 2019 to December 2019) was inappropriate for the dynamic real estate sector. They argued that the Department should have gathered accurate information from the appellant for the relevant period to ensure a reliable best judgment assessment. 6. Violation of principles of natural justice: The appellant argued that the assessment order was passed without granting an opportunity for personal hearing, violating principles of natural justice. They cited Section 75(4) of the CGST Act, which mandates an opportunity for hearing when an adverse decision is contemplated. The appellant emphasized that the Department should have granted a hearing before passing the assessment order. 7. Imposition of penalty under Section 73(9) of the CGST Act: The appellant argued that the penalty imposed under Section 73(9) for a best judgment assessment under Section 62 was a misinterpretation of the law. They contended that Section 62 overrides Sections 73 and 74, and there is no express provision for penalty under Section 62. The appellant also noted that penalty under Section 73(9) requires a show cause notice under Section 73(1), which was not issued in this case. They argued that the penalty should be imposed under Section 127 after giving a reasonable opportunity of being heard. Conclusion: The adjudicating authority’s order was found to be flawed due to non-issuance of mandatory notice for part of the assessment period, failure to consider ITC, inappropriate methodology for best judgment assessment, and violation of principles of natural justice. The case was remanded back to the adjudicating authority with directions to follow the proper procedure under the CGST Act and Rules, 2017, and issue a speaking order by adhering to the principles of natural justice. The appeal was disposed of accordingly.
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